Federal Securities Act Flashcards
Which act covers initial filings?
Securities Act of ‘33
Which act covers periodic reporting?
Securities Act of ‘34
These are state laws regulating securities
Blue Sky Laws
Give examples of securities
Investment Contracts Stocks Bonds Debentures (unsecured bonds) Stock Warrants Stock Options Collateral Trust Certificates Limited Partnership Interests
What are two exclusions from securities?
General Partnership Interests
Certificates of Deposit
Why is a limited partnership interest considered a security but not a general partnership interest?
A limited partnership interest is considered an investment. A general partnership interest is considered an owner
Give examples of the criminal liability under ‘33 or ‘34
fines, imprisonment, or both
Give examples of the civil liability under ‘33 or ‘34
monetary damages
Who is strictly liable under ‘33
Issuers are strictly liable and may not use the due diligence defense
T/F
Section 10 b of ‘34 does not apply if securities are exempt from registration under ‘33 and ‘34
FALSE
You are always liable for fraud
What is the basic purpose of ‘33?
To provide investors with information to include the principal purposes for which the offering proceeds will be used
T/F
Under ‘33 there are guarantees of relative accuracy of the IPO
FALSE
No guarantees of accuracy
T/F
Under ‘33 there is assurance against loss
FALSE
No assurance against loss
T/F
Under ‘33 there is an evaluation by the SEC
FALSE
No evaluation by the SEC
What are the 2 main requirements for public sale of securities in interstate commerce?
1) File a Registration Statement with the SEC
2) Give a prospectus to investors
A registration statement contains what 4 items? (PANS)
P - Prospectus
A - Audited Financial Statements
N - Names of Issuer, Directors, & Underwriters
S - Securities Information
Issuers cannot sell until when?
The effective date, 20 days after the filing date
T/F
Although issuers cannot sell until the effective date (20 days after filing), they can make oral/written offers to sell during this wait period
FALSE
They can make oral offers, but no written offers
T/F
Although issuers cannot sell until the effective date (20 days after filing), they can make limited written announcements
TRUE
What are the exemptions from Registration under ‘33? (I DANCE)
I - Intra-State Offerings D - Regulation D A - Regulation A N - No Sale Transactions C - Casual Sales E - Exempted Securities
This is a preliminary prospectus, permitted under SEC Regulations, under the Securities Act of 1933
“Red-Herring” Prospectus
This makes known the availability of a prospectus
a Tombstone Advertisement
T/F
Securities issued by not-for-profit, charitable organizations would be regulated by the provisions of the Securities Act of 1933
FALSE
Not-For-Profit groups are among the list of exempt securities (i dancE)
T/F
Securities guaranteed by domestic governmental organizations would be regulated by the provisions of the Securities Act of 1933
FALSE
Securities by governments are among the list of exempt securities (i dancE)
T/F
Securities issued by savings and loan associations would be regulated by the provisions of the Securities Act of 1933
FALSE
Securities by banks are among the list of exempt securities (i dancE)
T/F
Securities issued by insurance companies would be regulated by the provisions of the Securities Act of 1933
TRUE
Although insurance and annuity contracts are exempt, securities issued by the insurance companies are not
An offering made under the provisions of Regulation A of the Securities Act of 1933 requires that the issuer
File an offering circular (abbreviated prospectus) with the SEC
T/F
An attorney for the corporation is considered an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements
TRUE
T/F
An owner of 5% of the corporation’s outstanding debentures is considered an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements
FALSE
Creditors, that is owners of debentures, are not considered to be insiders
T/F
A member of the board of directors is considered an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements
TRUE
T/F
A stockholder who owns 10% of the outstanding common stock is considered an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements
TRUE
T/F
The Wall Street Reform & Consumer Protection (Dodd-Frank) Act of 2010 increased the regulation of insurance companies
TRUE
T/F
The Wall Street Reform & Consumer Protection (Dodd-Frank) Act of 2010 prohibits banks from engaging in proprietary trading
TRUE
T/F
The Wall Street Reform & Consumer Protection (Dodd-Frank) Act of 2010 puts limits on the compensation of corporate CEOs
FALSE
T/F
The Wall Street Reform & Consumer Protection (Dodd-Frank) Act of 2010 requires mortgage originators to retain an economic interest in a portion of the credit risk of any securitized asset that they create and sell
TRUE
T/F
The Wall Street Reform & Consumer Protection (Dodd-Frank) Act of 2010 requires all members of the compensation committee of the board of directors to be independent
TRUE
T/F
The Wall Street Reform & Consumer Protection (Dodd-Frank) Act of 2010 requires all members of the corporate governance committee of the board of directors to be independent
FALSE
T/F
The Wall Street Reform & Consumer Protection (Dodd-Frank) Act of 2010 requires all voting members of the board of directors to be independent
FALSE
T/F
The Wall Street Reform & Consumer Protection (Dodd-Frank) Act of 2010 requires all members of the risk management committee f the board of directors to be independent
FALSE
What will make a note an exempted security? (i dancE)
Notes are exempt securities under the Securities Act of 1933 if:
1) They have a maturity of 9 months or less
2) They are used for commercial purposes rather than investment purposes
T/F
Whether or not securities are exempt from registration or not, they are still subject to the antifraud provisions of the Securities Act of 1933
TRUE
T/F
Any note is considered a security under the definition of the Securities Act of 1933
TRUE
T/F
Bond Certificates of Interest is considered a security under the definition of the Securities Act of 1933
TRUE
T/F
Debentures are considered a security under the definition of the Securities Act of 1933
TRUE
T/F
Securities exchanged for other securities by the issuer exclusively with its existing shareholders are exempt from registration under the 1933 Act if there is no commission paid and both sets of securities are issued by the same issuer
TRUE
This is a no-sale transaction (i daNce)
What was the purpose of the SEC adopting the registration statement Forms S-2 & S-3?
These forms were adopted to decrease the work that issuers have in preparing registration statements by permitting them to give less detailed disclosure (under certain conditions) than is required under Form S-1 which is the basic, long form.
T/F
When permitted, Forms S-2 & S-3 are preferred over Form S-1.
TRUE
These forms were adopted to decrease the work that issuers have in preparing registration statements by permitting them to give less detailed disclosure (under certain conditions) than is required under Form S-1 which is the basic, long form.
Generally under Regulation D various “minor” dollar value securities may be sold under the “small offerings” exceptions. Further, these securities can be resold without being registered if sold by an average investor, or if the transaction falls within the safe harbors of Rule 144 and Rule 144A.
What is Rule 144?
Rule 144 exempts registration if there is sufficient current public information about the company issuing the stock and if the seller has held the stock at least a year.
Generally under Regulation D various “minor” dollar value securities may be sold under the “small offerings” exceptions. Further, these securities can be resold without being registered if sold by an average investor, or if the transaction falls within the safe harbors of Rule 144 and Rule 144A.
What is Rule 144A?
Under Rule 144A, the stock may be resold to qualifying investors, and the seller must make it clear to the buyer they are relying on the Rule 144A exception.
